States Setting VW Settlement Priorities

August 11, 2017

States are set to receive $2.925 billion from the VW settlement, a national environmental settlement from the Volkswagen diesel emissions scandal, and many are working to identify their priorities for emission-reducing transportation projects. With the designation of Wilmington Trust as the VW settlement’s trustee looming, more and more states are proactively seeking stakeholder feedback to inform how they will use the Environmental Mitigation Trust funds to upgrade or replace older, higher-polluting diesel engines in vehicles and equipment. Some states, such as Michigan and Pennsylvania, have already released their draft Beneficiary Mitigation Plans, which indicate the states’ planned use of their funds, including their fuel, vehicle, and technology preferences, and in some cases, prioritization for areas that have historically faced difficulty meeting federal standards for ozone and fine particulate matter. States are driven by VW settlement’s requirement to fund the most cost-effective projects, those that provide the most pollution reduction per dollar spent.

Michigan was one of the first states to publish their draft Beneficiary Mitigation Plan. In March, the state’s Department of Environmental Quality issued a Request for Information to solicit input on their draft plan for the $60.3 million the state is slated to receive as part of the settlement. The draft includes categories of eligible projects and fund allocations per project type. Specifically, Michigan plans to designate 72% of the funds for on-road and non-road vehicle replacements, which includes Class 4-8 vehicles with a large portion of the money going towards government owned school and transit busses. An additional 4% is allocated for stationary engine replacements and 14% for electric vehicle charging infrastructure to support light duty vehicles. The fuel type is not prescriptive for projects; however, they do specify that clean diesel replacements will be eligible.

Pennsylvania released their draft Beneficiary Mitigation Plan in May for the $118 million they have been allocated. Their draft plan prioritizes off-road fleets, including marine and rail projects, such as ferries and freight switchers. The state’s Department of Environmental Protection, which is responsible for developing and implementing the plan, has said that while off-road projects are expensive compared to on-road truck fleets, they could cut the largest amount of emissions and therefore be cost-effective. They also designate a large portion of their funding for on-road fleets, including local freight trucks, school and public transit buses. Similar to Michigan, the current draft plan does not include a fuel-specific priorities.

Most other states have yet to publish draft plans but in some cases they have released their goals and priorities to begin formulating their plans. In April, Washington released its VW funding goals, which places a large emphasis on electric vehicles. This focus is in line with their “Results Washington” initiative, which sets a goal of 50,000 electric vehicles on the road by the year 2020. Washington has also developed a joint plan with Oregon to coordinate with Volkswagen on the $2 billion they are required to spend on zero emission vehicles and infrastructure as a part of the ZEV Investment Trust, a different provision than the Environmental Mitigation Trust. The goal for the joint efforts is to help bring a corridor of publicly available electric vehicle charging to the Pacific Northwest.

While states won’t be able to access their share of the VW settlement funds for another few months, many states have already initiated the process of formulating their plans. As public comment periods open, it is critical for fleet managers, fuel providers, OEMs, technology providers, and other key stakeholders to ensure their voice is heard to help inform the final VW settlement Beneficiary Mitigation Plans for each state. For fleets with multi­state operations, a comprehensive outreach approach is essential in order to fully take advantage of the Volkswagen settlement funds.